Hess is trading at $154 right now. They've agreed to be purchased by Chevron @ $171. That's 10%+ upside. That seems like an easy 10% on the table. I realize that the price could trade down in the meantime, shareholder and regulatory approval are still risks to the deal, but the deal is still likely to get approval. Is there a risk that I am not seeing? I remember the Twitter buyout a year ago and looking back all the shareholders got their $54.20.

I could increase the return if I sold covered calls on the stock. Plan would be to sell the $170 strike calls that expire in JANUARY 2025 that are trading at $12.20 (bid). That would bring in $1,210/ contract and upon completion of the deal I would have my shares called away at $170 (am I correct on this?). This strategy would return 18%+.

I also realize I could sell cash secured puts and lower my cost basis.

Is there a risk that I am not seeing or something wrong with my thinking?

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Posted by castorinho

13623 posts

Member since Nov 2010

86586 posts

Posted on 10/25/23 at 9:47 pm to TchoupitoulasTiger

quote:
Is there a risk that I am not seeing?

It's going to take a while before closing

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Posted by Samso

nyc

Member since Jun 2013

5036 posts

Posted on 10/25/23 at 10:06 pm to TchoupitoulasTiger

Close is PROJECTED for H1 2024. Will probably be Q3.

Also the deal is all stock. Meaning each Hess shareholder gets like 1.025 CVX shares at close. Hess and CVX stock will literally move in tandem up to the close.

Elon purchased Twitter in cash.

This post was edited on 10/25/23 at 10:10 pm

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Posted by Jag_Warrior

Virginia

Member since May 2015

4292 posts

Posted on 10/26/23 at 9:58 am to TchoupitoulasTiger

quote:
Is there a risk that I am not seeing or something wrong with my thinking?

As far as the option plays, not really. But I don’t know that I’d use the TWTR situation as an example. I was caught up in that foolish mess and it was not fun. Though with the puts you mentioned, if the deal runs into a roadblock, there’s the possibility that the stock craters. But I don’t follow HES and don’t know what the “normal” price range was pre-announcement of this deal. With the covered call, same downside risk (except that your long shares will be at the current price), but by going out that long in expiration, I’d say the odds would tilt in your favor.

I don’t know anything about your experience with options or your risk profile, but you may consider a short iron condor or (my general preference) a jade lizard (short cash secured put and short call spread with the short call strike above the proposed buyout price).

Just throwing out some additional ideas for you. But depending on your risk tolerance, yours is not a terrible plan as a speculative play.

Let us know what you decide to do.